Azim Premji: Capacity Building Helps Ethical Behaviour

Azim PremjiThe Man: The chairman of Wipro converted a vegetable oil manufacturing and trading firm into one of the world’s most respected IT services companies; identified the potential of energy and environment business early on—and is betting a quarter of Wipro’s revenues will come from green services. He tells us the real threat to business is from within, from poor ethical standards and lack of integrity.

The Oeuvre: Two years ago, Premji transferred Rs 8,000 crore worth of shares to Azim Premji Foundation which works on education and related areas.

X-Factor: Low-key, private and sometimes brutally honest.

The Message: Businesses must reconnect success and profits with social progress.

The Hypothesis The real threat to business is from within, from poor ethical standards and lack of integrity that can do incalculable harm. History has proven repeatedly that business ethics, shared value and corporate governance determine the longevity of an enterprise.

So What? What is required is ‘capacity building’ towards deeper ethical behavior. Employees must know compliance is not a tick-box activity and they ought to witness their organisations transcend compliance and infuse ethical practices into every day action. They need to be empowered to thwart unethical action at work and appreciate the fact that business integrity is directly related to the future of the company, their families and that it securitizes their livelihoods.

Any business has two obvious dimensions; first, to do businesses we must be creative, enterprising and innovative. That’s what leads to good business ideas—ideas that serve society, create employment, generate wealth, and improve the world we live in. Second, once a business is created, it must protect and sustain itself. We think of this as being centred on finding capital, great talent, intelligent marketing and raising barriers by creating competitive advantages. However, the real threat to business is from within, from poor ethical standards and lack of integrity that can do incalculable harm. In a world that is plagued by constraints, being an ethical organisation calls for serious and sustained action.

History and recent past have shown repeatedly that business ethics, shared value and corporate governance determine the longevity of an enterprise. Integrity and unflinching commitment to values is what builds the backbone of a strong business. It is this that drives the trust that society, clients and employees place in any enterprise.

The last two decades have been especially revealing. We have witnessed businesses succumb to poor ethical standards, impacting not only on their immediate stakeholders, but entire economies and industries. A common reason attributed to the falling trust in business is that the latter is trained to act primarily in its own interests with little consideration for the larger good; the 2008 global financial crisis is often cited as an illustration of this moral shortcoming. Naturally, there is a crisis of confidence in the values of business organisations; there is a crisis of confidence in their ability to lead; and there is a crisis of confidence in their moral right to continue to do business.

However, there is a silver lining to the cloud. Over the last decade or so, the response from the business community to integrity violations and breaches is growing wider and stronger. This is encouraging. We are witnessing a course correction. Societies and companies are creating better ways to address the issues of eroding business values, integrity and ethics. Policy and standards are coming into play, stronger management systems are evolving, transparency in business conduct is highly prized and where there is failure the penalties are severe. This is commendable. But it is difficult to say if these are truly the solutions that drive business sustainability. Sometimes, policy, standards and legislation appear to tilt on the other side, and seem stifling.

Maintaining guidelines and reporting frameworks come with a cost. Invariably, the cost is transferred to the customer. My apprehensions with depending solely on guidelines and standards persist for other reasons. Primary amongst them is the fact that regulations lead to compliance and not necessarily to business sustainability. Anything externally driven is not sustainable. On the other hand, ethical standards are fundamental and earn the goodwill of all stakeholders Does this mean that guidelines and standards should be junked? Not in the least. They must be embraced. With some road testing, these guidelines could become norms, and hopefully, over a period of time, they will be integrated in business systems and processes.

From an India perspective, there is an equally deep and urgent need to go beyond compliance enforced by standards. Last year, the Ministry of Corporate Affairs announced the National Voluntary Guidelines (NVG) outlining the social, environmental and economic responsibilities businesses must work towards. It is progressive guidance. It may appear to be a small start, but there are very few countries to have had the foresight to formulate such recommendations.

The timing of the NVGs is perfect. Globally, corruption adds up to 10 percent to the total cost of doing business and 25 percent to the cost of procurement contracts in developing countries. The cost of moving a business from a relatively spotless geography to a country that has high to medium levels of corruption is fairly high: The corruption adds the equivalent of a 20 percent tax on foreign business. There are even bona fide economic reasons for businesses to develop ethical standards.

Like anything else in business, what is required is ‘capacity building’ towards deeper ethical behaviour. From our experience at Wipro, we know that the capacity building begins not at the top, but at the bottom. Employees must know, feel and be reassured about the fact that they work in an environment that is safe in every sense of the word. They need to know that compliance is not a tick box activity. They need to witness their organisations transcending compliance and infusing ethical practices into everyday action. They need to be empowered to thwart unethical action in their work environments. They need to appreciate the fact that business integrity standards are maintained and are directly related to the future success of the company. They must realise that maintaining those standards—economic, social and environmental—insulates them, their families and their company from legal and social action. It securitizes their livelihoods.

At Wipro, we live by ‘Spirit of Wipro’, the bedrock of our corporate culture. Spirit of Wipro represents our three core principles or values, which are intensity to win, acting with sensitivity and being unyielding on integrity in all circumstances. Employees must demonstrate commitment towards responsible and sustainable business with honesty and fairness in action.

An ethical organisation is one that is made up of people with unimpeachable integrity. People with integrity think with greater clarity and take better decisions. They act appropriately in the short term without compromising on the firm’s long term interests. Such thinking is of great value in managing the unexpected and in adapting to change. It prevents the organisation from falling prey to the Titanic syndrome as it is able to act far in advance of any iceberg sighting, minimizing any collateral damage in times of crisis. The economic value of sound and prudent decision making such as this is immeasurable.

We truly believe that our values make eminent business sense. Values help us in clarifying what everyone should do or not do in any business situation. It saves enormous time and effort because each issue does not have to be individually debated at length.

Values transmit trust. Trust is not only at the heart of leadership, but forms the essence of all relationships. Trust is the only currency that can sustain a corporation through the turbulences over its lifecycle.

Ultimately, leadership based on values has long-term benefits. Cutting corners can at best provide immediate benefits, with hidden consequences that could prove disastrous later. You may call it by any name, but there is a powerful law in nature that returns you manifold integrity in your relationship with society.

We are witnessing a major change over the years. Employees have begun to recognise that the integrity quotient of their company decides their continued employment and professional development.

They and their families take pride in, and feel positive about, being part of an organisation that will not jeopardize their future. If we are determined to create safety for employees—which is a business agenda related to talent retention—using ethics as the platform, we would have started a process that has greater power than the steam engine had to industrialize the world.

The eco-system for doing business has always been dominated by a not-so-friendly policy environment and it will always be wrought with complexities.

Yet, adherence to the principle of shared value—creating economic value that also creates value for society—by meeting its needs and challenges is the way forward for companies. And it will help if regulatory environment promotes practice of shared values rather than work against it.

Companies like us completely believe that businesses must reconnect success and profits with social progress. Practicing business ethics or shared value steadfastly is the only way to achieve economic success.

Recognitions such as being acknowledged recently as one of the 2012 World’s Most Ethical companies by the Ethisphere Institute, the American leading business ethics think-tank is a reflection of our long standing legacy of conducting business on foundation of transparency, integrity, trustworthiness and honesty. Only two Indian firms were recognised by Ethisphere Institute out of 145 companies.

This recognition follows inclusion in the Dow Jones Sustainability Index for the second time in succession and an inclusion in the NASDAQ Global Sustainability 100, a reflection of our financial sustainability. Such recognitions clearly demonstrate that the debate on whether values come in the way of success is baseless because values not only help in achieving success but also make success more enduring and lasting. Values combined with a powerful vision can turbo-charge us to scale new heights.

In Wipro, we defined our beliefs long before it became a fashion to do so. It not only helped us in becoming more resilient to stand up to crises we faced along the way, but it also helped us in attracting the right kind of people.

(This story appears in the 25 May, 2012 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)